Essay
On January 2,2017,Winston,Inc.issued 10,000 bonds at $1,055 each.Each bond contains 25 stock warrants,each of which gives the owner the right to purchase one share of Winston's $2 par value common stock at $35.The current selling price of common stock is $25 per share.Winston bonds without stock warrants are currently selling for $1,035.
Required:
1.Prepare the journal entry to record the sale of the bonds if the warrants are nondetachable.
2.Prepare the journal entry to record the sale of the bonds if the warrants are detachable using the incremental method.
3.Prepare the journal entry to record the exercise of all warrants on May 16,2021,when the market price of the stock was $52,using the incremental method.
4.What is the market value of the new stock?
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